|
Closing and Title Costs
It's the big day.
The day you go to the title or escrow company, sign your
name on the dotted line, hand over a check and prepare to take ownership of your new
home.
It's also the day that you and the seller will pay "closing" or settlement
costs, an accumulation of separate charges paid to different entities for the professional
services associated with the buying and selling of real property.
It's too often a day filled
with uncertainty and stress.
To help you better understand this confusing subject, the
Land Title Association has answered some of the questions most commonly asked about title,
closing and closing costs.
What services will I be paying for when I pay closing costs?
You
will usually be paying for such things as real estate commissions, appraisal fees, loan fees,
escrow charges, advance payments such as property taxes and homeowner's insurance, title
insurance premiums, pest inspections and the like.
How much should I expect to pay in closing costs?
The amount
you pay for closing costs will vary; however, when buying your home and obtaining a new loan,
an estimate of your closing costs will be provided to you pursuant to the Real Estate Settlement
Procedures Act after you submit your loan application. This disclosure provides you with
a good faith estimate of what your closing costs will be in the real estate process. An itemized
list of charges will be prepared when you close your transaction and take title to your new
property.
Can I pay for my closing costs in installments?
No, and it
is easy to understand why. Many different parties will have fulfilled their responsibilities
and be awaiting payment upon closing. The title or escrow company will disburse money to
those parties, pursuant to the escrow instructions, when funds are available.
Will I be allowed to write a personal check to cover my closing cost?
Your
closing funds should be in the form of a cashier's check, issued by an institution from the
state of your purchase, made payable to the title company or escrow office in the amount
requested. A personal check may delay the closing or may be unacceptable to the title or
escrow company. An out-of-state check could also cause a delay in your closing due to possible
delays in clearing the check.
How much can I expect to pay for Title Insurance?
This point
is often misunderstood. Although the title company or escrow office usually serves as
a meeting ground for closing the sale, only a small percentage of total closing fees are
actually for title insurance protection.
Your title insurance premium may actually amount
to less than one percent of the purchase price of your home, and less than ten percent
of your total closing costs. The title policy is good for as long as you and your heirs own
the property with the payment of only one premium.
Why are separate owner's and lender's title insurance policies issued?
Both
you and your lender will want the security offered by title insurance.
Your home is an
important purchase, and you will want to be certain your home is yours, all yours. Title
insurance companies insure your rights and interests in order to protect you against
claims.
Your lender is looking to insure the enforceability of their lien on your
property and marketability. What is meant by "marketability"? Local lenders will "originate" a loan
here, and, often, sell it to an out-of-state investor. This investor, who may never see the
property, needs to know that he has a valid and enforceable lien. Title insurance is
the way of making certain. Without a current title policy, the loan is essentially unmarketable.
What does my Title dollar pay for?
Title insurers, unlike
property or casualty insurance companies, operate under the theory of "risk elimination."
Risk
elimination can only be accomplished after an intensive period of risk identification.
Title companies spend a high percentage of their operating revenue each year
collecting, storing, maintaining and analyzing official records for information that
affects title to real property. The issuance of a title insurance policy is highly labor-intensive.
It is based upon the maintenance of a title "plant" or library of title records, in many
cases dating back over a hundred years. Each day, recorded documents affecting real property
are posted to these plants so that when a title search on a particular parcel is requested,
the information is already organized for rapid and accurate retrieval.
Trained title
experts are able, with the aid of their extensive title plants, to identify the rights
others may have in your property, such as recorded liens, legal actions, disputed interests,
rights of way or other encumbrances on your title. Before closing your transaction, you
can seek to "clear" those encumbrances which you do not wish to assume.
The goal of title
companies is to conduct such a thorough search and evaluation of public records that
no claims will ever arise. Of course, this is impossible--we live in an imperfect world,
where human error and changing legal interpretations make 100 percent risk elimination
impossible. When claims do arise, title insurance companies have professional claims personnel
to make sure that your property rights are protected pursuant to the terms of your policy.
To conclude, when you pay for your title insurance policy, you are paying
for a team of professionals who have worked together to deliver you a title insurance policy
which represents protection for your ownership of real property.
Who can I look for straight answers on Title, Closing, and closing
costs?
Title or escrow company personnel are available to review and explain your
title policy and your closing statement.
Back to Title and Escrow Information
|
